Pepco Group has booked a £675m impairment charge on its UK subsidiary Poundland, driven by “a significant decline in performance in FY24 and weaker outlook for profitability amid increasing competition and cost challenges.”
The charge, which primarily reflects the goodwill from the Poundland acquisition, follows a 3.6% fall in like-for-like sales at the value retailer for the year ending 30 September 2024.
Overall revenue at Poundland edged up 0.2% year-on-year while EBITDA declined 21.5% to €153m (£126.6m).
The group reported a net loss of £548m for the period, driven by the impairment charge. Underlying EBITDA across the group rose 25.2% year-on-year to €944m (£781m).
The UK discounter‘s performance was largely attributed to increased competition, rising costs and particular challenges in its clothing and general merchandise ranges after transitioning to Pepco-sourced products earlier this year.
Group CEO Stephan Borchert said: “At Poundland, recent performance has been very challenging, impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.
“We are taking swift action to get Poundland performance back on track, focusing on a return to Poundland’s strengths. We will also closely evaluate Poundland’s overall competitive positioning and requirements for future success as an FMCG-led format. We will provide further updates on Poundland during the first half of 2025.”
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Despite the difficulties at Poundland, Pepco Group posted a record revenue of £6.2bn, up 10.2% year-on-year, driven by growth in its other divisions, including Dealz. Underlying EBITDA rose by 25% to £824m, in line with guidance.
The Pepco division of the retail group also continued its expansion in Central and Eastern Europe, adding 331 new stores during the year, in comparison with 13 and 48 new stores across Poundland and Dealz Poland respectively.
Pepco Group also announced its first-ever dividend, signalling confidence in its outlook and potential future cash returns, including share buybacks.
While the group achieved strong overall growth, like-for-like revenue across the group fell by 3.2%, reflecting broader macroeconomic pressures and challenges in certain markets.
Non-executive chair Andy Bond said: “We started the year with a number of objectives which included rebuilding Pepco’s profitability in its core Central and Eastern European (CEE) market, gross margin recovery, adopting a more disciplined approach to investment with more targeted growth, reviewing underperforming areas of the business and delivering stronger cash generation. We have delivered on these objectives, but there remains more to achieve.”
Borchert added: “Pepco Group has very attractive, market-leading retail businesses, providing great product range, value and convenience to over 60 million customers each month across Europe.
“Within the Group, I see the Pepco concept itself as our key engine for future strategic and financial growth, particularly in Pepco’s CEE heartland.
“Pepco generates the vast majority of the Group’s earnings and our highest returns on capital – we plan to further build on that strong base. In the year ahead, our core focus at Pepco will be to deliver improved like-for-like revenues. Pepco’s like-for-like performance has been positive since the start of September – an encouraging start.”
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